C3.ai (NYSE: AI) was the world’s first artificial intelligence (AI) company when it was founded in 2009. It has developed over 40 turnkey, customizable software applications designed to help businesses accelerate their adoption of AI.

Thanks to a change in C3.ai’s business model two years ago, combined with soaring demand for its AI applications, the company is currently experiencing a rapid acceleration in its revenue growth. C3.ai will report its latest financial results for its second quarter 2025 (ended October 31) on December 9, and another strong performance is expected.

Here’s why I think C3.ai stock will soar after investors digest the Q2 report.

Image source: Getty Images.

Filling a critical void in the AI ​​industry

Building AI software applications from scratch can be incredibly expensive, and it also requires the right talent and expertise. Not all organizations have these resources, which is why C3.ai’s turnkey applications are very popular in non-tech industries such as manufacturing, financial services and oil and gas.

C3.ai has published a number of case studies that highlight the effectiveness of its software. A US industrial manufacturing company with $30 billion in annual revenue approached C3.ai to help reduce their inventory holding costs. It adopted the C3.ai Inventory Optimization application, which uses data from historical sales and production orders to predict how much product should be on hand.

The manufacturer was able to reduce its inventory by up to 35% using the application, resulting in between $100 million and $200 million in annual savings.

Likewise the oil and gas giant Shell has been working with C3.ai for years to monitor trillions of rows of data generated by thousands of pieces of equipment. It has over 100 AI applications in various stages of development, helping the company do everything from reducing carbon emissions to performing predictive maintenance, which can prevent catastrophic failures.

C3.ai sells its applications directly to customers, but also through partnerships with cloud giants like Amazon Web Services and Microsoft Azure. In the fiscal year 2025 first quarter (ended July 31), C3.ai closed 51 customer deals through these partners, which was a whopping 155% year-over-year increase. It highlights the significant demand for enterprise AI applications in the enterprise sector.

Revenue growth is expected to accelerate again in the second quarter

At the start of C3.ai’s 2023 fiscal year (which started on May 1, 2022), the company announced plans to switch from a subscription-based revenue model to a consumption-based model. The move was designed to eliminate lengthy negotiation processes, allowing customers to sign up faster and only pay for what they use.

C3.ai told investors that the transition would lead to a temporary drop in its income growth while shifting customers to the new model, as it would take time for consumption to increase. As expected, C3.ai’s revenue growth flatlined within four quarters of the announcement.

But the company has since recorded six consecutive quarters accelerating revenue increase, which was the expected gain from the transition to consumer pricing:

Image source: C3.ai.

C3.ai generated a record revenue of $87.2 million in the first quarter of 2025, which was an increase of 21% compared to the previous year. It was the fastest quarterly growth in two years.

That acceleration is predicted to continue. According to the Wall Street consensus estimate for the second quarter (provided by Yahoo!), C3.ai could generate $91 million in revenue, which would be a 24% year-over-year increase. However, C3.ai’s guidance suggests revenue could grow by as much as 28%.

C3.ai stock could soar on second quarter earnings

C3.ai stock is currently down 83% from its all-time high, set during the tech frenzy of late 2020. It was arguably overvalued then, with its price to sales (P/S) ratio. rises to around 80.

The decline in C3.ai stock, combined with the company’s revenue growth since 2020, has pushed its P/S ratio down to just 9.7 as of this writing. That’s a 40% discount to the 16.1 average since the stock went public:

AI PS ratio data of YCharts

Because the P/S ratio divides a company’s market value with its trailing 12-month earnings, investors will typically pay a premium valuation when earnings grow rapidly. Therefore, I think C3.ai stock could trend higher — potentially even toward its average P/S ratio — if the company’s upcoming Q2 report shows a further acceleration in revenue growth. If it’s P/S do reach its long-term average, which would mean a 65% upside in the stock.

Past performance doesn’t predict future performance, but C3.ai stock is trading 13% higher since reporting its Q1 results, which could bode well for its upcoming Q2 report.

While there is reason to be optimistic about potential upside for C3.ai stock in the coming weeks and months, investors should always focus on the longer term. AI could be a multi-year technological revolution, which C3.ai CEO Thomas Siebel compares to the dawn of the Internet and the smartphone.

Citing research from Bloomberg, Siebel believes the AI ​​opportunity will be worth $1.3 trillion by 2032, so investors will need to stick around for the long haul if they want to capture as much of that value as possible.

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John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Anthony DiPizio has no position in any of the shares mentioned. The Motley Fool has positions in and recommends Amazon and Microsoft. The Motley Fool recommends C3.ai and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has one disclosure policy.